Citadel Is First Global Hedge Fund to Raise Fund in China

May 21 (Bloomberg) -- Citadel LLC, led by billionaire Ken
Griffin, became the first international hedge fund to complete
yuan fundraising from Chinese wealthy individuals and companies
through a local unit.

Citadel (Shanghai) Foreign Investment won regulatory
approval for currency exchange on March 26, marking the first
qualified domestic limited partner, or QDLP, to have
successfully completed fundraising in China, according to a
statement from the Shanghai government’s information office.

China’s leaders have pledged to promote freer movement of
capital in and out of the country and make the exchange rate
more market-based for investment purposes. Shanghai started the
QDLP program last year to allow international hedge funds to
raise capital in the local currency in China for overseas
investments, aiding the government’s experiment with capital
account convertibility and advancing its plan to build Shanghai
into a financial center.

“Foreign alternative managers have generally struggled
with designing investment strategies that appeal to qualified
Chinese buyers,” said Daniel Celeghin, Asia head of Casey Quirk
& Associates LLC, a Darien, Connecticut-based adviser to asset
managers. “If Citadel, a global brand-name hedge fund, is
successful, this will be a highly visible sign of QDLP’s
visibility.”

China Potential

International asset managers have long eyed the fundraising
potential of China which had 108.5 trillion yuan ($17 trillion)
of local-currency deposits at the end of April, according to
data from the People’s Bank of China.

The unit of Chicago-based Citadel, which has $18 billion of
assets under management, won $50 million of quota in July last
year, according to the Shanghai government statement. It began
to raise money after receiving a business license on Aug. 30, it
added.

Citadel, Man Group Plc, Winton Capital Management Ltd.,
Oaktree Capital Group LLC, Och-Ziff Capital Management Group LLC
and Canyon Partners LLC formed the first batch of foreign hedge
funds approved to participate in the QDLP program, Chinese
newspaper 21st Century Business Herald reported in September.
Each received a $50 million quota, it added.

“They’re establishing themselves now in order to have a
shot at the future potential demand from Chinese buyers,”
Celeghin said in an e-mail of the hedge funds’ willingness to
participate in the experiment.

Investors in the program currently consist mostly of
wealthy individuals, private companies and large financial
institutions, according to the statement.